Trying to buy a home or refinance the one you’ve got? If so, you’re probably dizzy from watching mortgage rates bounce up, down and sideways since summer.

A survey in June by real estate site Trulia found that 41 percent of potential homebuyers were concerned about rising interest rates: “The top worry among Americans who plan to buy a home someday, if they were to buy a home in 2013, is that mortgage rates would rise further before they buy (41 percent), followed by rising home prices (37 percent).”

Fluctuating rates are making these decisions particularly tough, Trulia says.

Cliffhanger

Keeping up with mortgage rates has been like following a close game of hoops. Turn your head for a moment and you miss the action. Here’s a recap:

Slow and steady. In 2012, the interest rate on a 30-year fixed-rate mortgage averaged 3.66 percent. Rates moved a little during the year, but nothing dramatic.

Up. Early this year, buyers and homeowners were lulled while rates hovered at 3.4 percent to 3.5 percent for the first five months. They crept up to 4 percent in June, but who knew that was a sign that things were about to go crazy?

Up more. Suddenly, whoa! Interest rates leaped a half percentage point in July and August, stopping for a while at 4.5 percent.

Down again. But that’s not the end of the story. In October, rates dropped again, to 4.1 percent. That’s roughly where they stand today.

What a difference a rate makes

Suppose you’re borrowing $200,000. Last year this time, with good credit, you could have a 30-year fixed-rate home loan at about 3.35 percent. Your monthly payment would be $881, not including taxes, homeowners insurance and mortgage insurance. (I used the mortgage calculator at HSH. Put in your own numbers to run your calculations.)

Today, at an interest rate of 4.19 percent, that same mortgage costs $977 a month – $96 more. If rates reach 4.5 percent again, you’ll be paying $1,013, or another $36 a month.

You can see that rates do make a difference. An $881 monthly payment is more affordable than buying the exact same home for $1,013 a month.

And there’s the problem: You may still afford a home as rates rise. But can you afford the same home? Or will you have to step back your expectations and accept less home than you would have gotten previously for the same money?

Where are rates headed?

Instead of saying “if” rates reach 4.5 percent, I probably should have said “when.” Because, as the economy improves – and it is improving, albeit slowly — the federal government will stop buying Treasury securities, which is what’s currently keeping rates low.

It’s a complicated maneuver for economists, but the bottom line for the rest of us is this: Rates are probably headed up. The better the economy gets, the more apt they are to rise.

CNNMoney, peering into a crystal ball, talked with Freddie Mac’s chief economist, Frank Nothaft, who said he expects rates to hit 5 percent by the middle of 2014.

“That’s an increase of less than $24 a month for every $100,000 borrowed — enough to weed out borrowers who are struggling to afford homes but not enough to impact overall demand,” CNNMoney writes.

REALTORMag, published by the National Association of Realtors, adds, “Mortgage rates will likely rise above 5 percent in 2014 and average 5.3 percent by the end of 2015, according to the Mortgage Bankers Association’s forecast.”

Act sooner than later

Most people who needed to refinance have done it. Mortgage lenders are cutting their payrolls now to make up for their shrinking business.

But homebuyers are still in the game. If you’re a buyer or a would-be buyer, the message for you is clear: If you like today’s rates, get moving. They’re not likely to fall much, if at all. You can bet they’re headed up.

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Comments & discussion

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Kent

If you are looking at a house that is only affordable because of low interest rates, you should run, run fast and never look back. That house will plunge in value when interest rates finally do go back up.